South African Parliament to Adopt Mineral Law Changes Next Year

By Mike Cohen -
Nov 6, 2013

Amendments to South Africa’s mining
and oil laws to ensure the country benefits more from its
natural resources need refinement and won’t be adopted until
next year, Faith Bikani, the acting chairwoman of Parliament’s
mineral resources committee said.

Proposed changes to the 2002 Mineral and Petroleum
Resources Development Act include giving the state the right to
a free 20 percent stake in all new energy ventures as well as
compelling some mining companies to sell part of their output to
local processors. Miners Anglo American Plc (AAL) and BHP Billiton
Ltd. (BHP) have said the measures will hurt business, discourage
investment and may violate South Africa’s constitution and its
international trade obligations.

“We would have loved to pass the bill before the end of
this year but Parliament is adjourning next week and with a lot
of work left to deliberate on, it’s not going to be possible,”
Bikani, a ruling African National Congress lawmaker, told
reporters in Cape Town today. “We also have to take into
account the fact that we don’t want any legal challenges when we
are done with it.”

South Africa is the continent’s largest coal and gold
producer and the world’s biggest supplier of platinum and
chrome. With elections due next year, the government is pressing
the mining industry to do more to help reduce a 24.7 percent
unemployment rate.

Development Imperatives

The revised law proposes giving the mines minister the
right “to designate any mineral, mineral products or form of
petroleum for local beneficiation,” and decide what percentage
must be made available to processors after taking into account
“national developmental imperatives.”

It would also compel energy companies to cede 20 percent of
all new oil and gas ventures to the state, which will have the
right to buy a further 30 percent at market-related prices. A
proposed change to the law introduced at a committee hearing
today would give the state the option to enter into output-sharing agreements with oil companies.

There was a lack of clarity about how the new provision
would work, said Hendrik Schmidt, a lawmaker with the opposition
Democratic Alliance.

“The concern that has still not been addressed is once
that agreement has been concluded for a 20 percent free carried
interest, what is the issue with regards to the cost in
generating the revenue to which the state is entitled,” he said
in an interview.

Oil Imports

South Africa imports about 70 percent of its oil needs,
processing the remainder of its fuels from coal and gas. The
country had proven oil reserves of 15 million barrels in January
2011, located to the south and off the west coast near the
Namibian border, according to Oil & Gas Journal. While Irving,
Texas-based Exxon Mobil Corp. and Royal Dutch Shell Plc in The
Hague have stakes in offshore blocks, extraction is yet to take
off.

“We are not done yet going through the details,” Bikani
said. “There are quite a lot of changes that we need to take
into consideration. We need to go back and do some research.
Some of the definitions and objectives in the bill need to be
defined more clearly.”